Fr Salvatore Anello from Sicily allegedly groped his victims, under-age girls and mentally disturbed women, during exorcism sessions.
The 59 year old, who worked as a chaplain at Palermo's Civic Hospital and was arrested on Friday at the Capuchin monastery, did not have the authority of his bishop to conduct exorcisms.
Police also detained 52 year old army general Salvatore Muratore who is also accused of conducting exorcism services where females were taken advantage of.
Colonal Muratore belonged to the Renewal of the Holy Spirit prayer group but, as a layman, he is not qualified to undertake exorcism sessions.
News of the two men's arrests come little more than a month after an infamous Catholic exorcist who branded Harry Potter and yoga "evil" died at the age of 91.
Rev Gabriele Amorth, who published a number of books about his work and the theme of good and evil, passed away in September at a hospital in Rome following a long illness.